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Book: Automate This: How Algorithms Came to Rule Our World!

Posted: Tue Sep 11, 2012 10:31 am
by brian
Sept 2012: Just finished a recent book Automate This: How Algorithms Came to Rule Our World by Steiner.
As a computer programmer since the late 1970's, I found this book interesting and frustrating!

  • In how Lebniz (1700's) predicted binary computing centuries before the digital revolution (and as a Sir Issac Newton devotee who still believes the credit for discovery of Calculus goes to Newton, whereas the credit for making it useful for everyday usegoes to Lebniz, Steiner gives them joint credit for the discovery, but I digress...).
  • Books by Euclid (300 BC), Fibonacci (1200's), Guass (1800's) and others were used to build algorithms to manipulate and exploit the market, to help hedge funds WIN!
  • And interestingly those same books are behind flash crashes (improper handling of outliers in Guassian distributions)
  • They are also behind the Credit default Obligations (CDO) debacle: Guassian copula's were used to determine relationships between two or more variables but if the variables were based on humans, and subject to human errors, it built the house of cards that came crashing down).
    Of course this is nothing new. He also relays the story of Rothschild in the 1800's:
    • Rothschild used carrier pigeons to bring news faster than by horseback which allowed him to corner the bond market during the Napoleonic wars of 1815 (Knowing victory happened he started the day with a selling spree which caused panic in the market (he must know something!) and then he bought all the bonds up at rock bottom pricing! Then when the couriers arrived (via horseback) and announced the real results of the wars, voila! those bonds bought at rock bottom prices rose exponentially in value and the Rothschild's wealth also rose exponentially!).
    Bots are everywhere: call centers, personnel evaluations, game theory, medical care.
  • The main purpose of the use of bots has been mainly to make money, not necessarily make for a better world: Bots eliminate jobs by taking the human element out of things, rig the system so those with the biggest, fastest, smartest bots can make billions of dollars. If you ever read the Wired article by Joy "Why the future doesn't need us' this book is a good argument for the future world where humans are no longer needed. Computer programmers become the most powerful people so we automate the programmers and then what do you have? A world where people aren't needed!
    Of course Bots also are responsible for the elimination of millions of jobs. Does that make the world better? Depends which side of the money you are on! As a programmer who has worked his life in using algorithms in the field of highway safety with my father for over a collective 80+ years, and having been a witness and participant in the phenomenal and astounding breakthroughs in computational power and accessibility, particularly with respect to the field of highway safety, I guess it is frustrating from a selfish point of view: WHY wasn't I in the right field to make billions from my utilization of algorithms??!!
Of course I jest! This was a very interesting look at some very interesting and innovative utilization of mathematical theory. Watch out people, the computers are not your friends, they will soon replace YOU!!
A highly recommended read!

Re: Book: Automate This: How Algorithms Came to Rule Our Wor

Posted: Mon Sep 17, 2012 10:15 am
by brian
Sept 15, 2012: Along the same lines as the 'Automate This' Book comes a NYTimes Sunday Review article "The Computer as Music Critic"
The article cites a recent article published in the journal Scientific Reports: In the research computers were used to analyze western popular music recordings released between 1955 and 2010, including pop, rock, hip-hop, folk and funk. They looked for static patterns characterizing the generic use of primary musical elements like pitch, timbre and loudness and then measured a number of general trends for these elements over the years.
They found three significant trends over time:
  • They counted the different transitions between note combinations and found that this number decreased over the decades.
    The variety of timbre has been decreasing since the 1960s, (meaning that music has tended to stick to the same sound qualities, instruments the same notes)
    The recording levels had consistently increased since 1955, confirming a so-called race toward louder music
See the full article The Computer as Music Critic"

Re: Book: Automate This: How Algorithms Came to Rule Our Wor

Posted: Thu Sep 27, 2012 5:01 pm
by brian
Sept 27, 2012: NY Times Beyond Wall St., Curbs on High-Speed Trades proceed
If you've read the thread Book: Automate This: How Algorithms Came to Rule Our World!or the book you'd read how they have build a direct line fiber optic cables between NYC and Chicago to shave milliseconds (yea, that's right, 0.001 seconds) off the transmission speed because bots check for pricing discrepancies and fire buy/sell/whatever orders to quickly trade to make a little bit per trade which when multiplied by millions of transactions produces profit!
From the article today in the NY Times
  • "Industry leaders and regulators in several countries including Canada, Australia and Germany have adopted or proposed limits on high-speed trading"
  • In Australia the Industry Super Network wrote to the country’s top securities regulator last week supporting recent reform efforts and calling for a wholesale moratorium on new high-speed trading.
  • “Structural advantages (largely derived through technology) can unfairly redistribute profits from traditional long-term investors to” high-speed trading firms.
  • The European Parliament has been drafting new trading regulations. One new rule would require high-speed firms to honor the quotes they submit for at least 500 thousandths of a second, an eternity for firms that are used to submitting and withdrawing quotes in millionths of a second.
  • Additional rules coming into force in Canada are expected to cut the amount of trades going to dark pools (You can read about Dark Pools in the book!)
See the full article Beyond Wall St., Curbs on High-Speed Trades proceed

Re: Book: Automate This: How Algorithms Came to Rule Our Wor

Posted: Mon Oct 08, 2012 11:33 am
by brian
Oct 8, 2012: In another related article to the recent book 'Automate This' which is the subject of this thread, the SEC turns to a trading company to help them regulate rapid traders. Sort of like asking the fox to guard the hen house?
  • Another interesting tidbit contained in the NY Times article, "One recent project has involved building towers that can beam trading data to Chicago via microwave, a faster method of transmission than fiber optic cables". If you read the book you will read about the expense folks went through to run a straight line fiber optic cable between NY and Chicago. Apparently microwave lines are yet another innovation afoot to cut another millisecond or two off the time it takes to transmit information and trades.
NY Times: To Regulate Rapid Traders, SEC Turns to One of Them
Tradeworx, a 45-person firm based in New Jersey, will tutor regulators on a sophisticated computer program they designed for the SEC to give them their first real-time window into the stock market. Called 'Midas' it is part of a broader effort to monitor the proliferation of new technologies for 'rapid trading' which sometimes are used to overload the system to provide delays in execution as well as monopolize on minor discrepancies in prices.